The White House-backed proposal from Democratic leaders would have left interest rates on subsidized Stafford loans at 3.4% for another year while lawmakers took up a comprehensive overhaul. The one-year stopgap measure failed to overcome a procedural hurdle as Republicans – and a handful of Democrats – urged colleagues to consider a plan now that would link interest rates to the financial markets and reduce Congress's role in setting students' borrowing rates.

Democrats failed to muster the 60 votes needed to advance the measure. The vote was 51-49, with no Republicans voting to move forward.

Without serious negotiations between the parties – and within a fractured Democratic caucus – students would face higher costs to repay their loans after graduation.

"Today our nation's students once again wait in vain for relief," said Senator Tom Udall, Democrat of New Mexico. "They expected more of us and I share their disappointment."

"Today, we failed. And our nation's students pay the cost of that failure," he added after the vote.

The failure to win a one-year approval – combined with little interest in such a deal in the Republican-led House – meant students would be borrowing money for fall courses at a rate leaders in both parties called unacceptable.

Immediately, lawmakers blamed the other party for the results.

"Today's vote is just another example of how out of touch Republicans in Congress are with the struggles of everyday American families," said Senator Patty Murray, a Washington state Democrat.

Representative John Kline, the Republican chairman of the House Education and the Workforce Committee, blamed Democrats.

"Right now, millions of students trying to prepare for college and apply for financial aid are facing higher interest rates – all because a cadre of Senate Democrats is completely unwilling to compromise," Kline said.

The rate increase does not affect many students right away; loan documents are generally signed just before students return to campus, and few students returned to school over the July 4 holiday. Existing loans are not affected.

However, absent congressional action in the coming weeks, the increase could spell an extra $2,600 for an average student returning to campus this fall, according to Congress' Joint Economic Committee.